Following the announcement from CEO Pat Gelsinger, Intel's stock experienced an approximate 8% increase in after-hours trading. Gelsinger's memo to employees highlighted that Intel has secured a multibillion-dollar contract with Amazon, which will involve payments for design services and manufacturing from the Santa Clara, California-based company. The memo also detailed Intel's strategies for cost reduction.
Amazon's AWS division is already engaged in designing various chips for its data centers and has enlisted Intel to package at least one variant. Intel will manufacture an "artificial intelligence fabric chip" for AWS, utilizing the chip maker's advanced 18A process, which is currently the most sophisticated option available to external clients.
Intel anticipates further design collaborations with Amazon, leveraging the upcoming 18AP and 14A manufacturing processes.
In the memo, Gelsinger outlined several initiatives aimed at revitalizing the company, especially following the disappointing earnings report for the second quarter released last month.
"The board and I recognize that we have significant work ahead to enhance efficiency, boost profitability, and strengthen our competitive position in the market," Gelsinger stated in the memo.
As part of the board's strategic decisions, Intel plans to divest a portion of its stake in the programmable chip business, Altera. Additionally, the company will suspend construction on its chip manufacturing facility in Germany for two years, a decision previously reported by Reuters. Plans for a similar pause in Poland have also been announced.
Intel confirmed that its plans to expand manufacturing operations in the United States remain unchanged.
Intel has confirmed its intention to retain its manufacturing division, or foundry, within the company, aligning with previous reports from Reuters. This foundry segment is vital to Gelsinger's strategic turnaround plan for Intel, which he presented in 2021. Prior to securing Amazon as a client, Intel faced challenges in attracting high-profile customers for public discussion.
In a recent memo, Gelsinger indicated that the foundry division would operate with increased autonomy, including the ability to seek external investment. Intel aims to create this division as an independent subsidiary, governed by an operational board responsible for overseeing its activities. Earlier this year, the foundry unit began reporting its financial results separately from the design segment.
Additionally, the company is implementing various measures to enhance the core technology of its central processing units (CPUs) and is reorganizing several divisions, including those focused on automotive and edge computing.
On Monday, Intel announced it had received up to $3 billion in direct funding through the U.S. CHIPS and Science Act, as part of the Secure Enclave initiative.
The company also stated that it would notify approximately 15,000 employees about layoffs in mid-October, a decision initially communicated in August.